Blockchain doesn’t look different from other decentralized systems, but it is often described as the backbone of a transaction layer for the internet. It is termed as a digital ledger of transactions that is distributed across the network of computer systems.
Blockchain technology is essentially a structure used to store the transactional records in several databases in a network connected through nodes.
In simple words, blockchain technology is a record of transactions on the digital platform. These blockchains are used to record the transactions made by cryptos such as Bitcoin, Ether. The technology represents an innovative distribution that eliminates the requirement for the third party to facilitate digital relationships. Transactions are broadcasted on a blockchain, and every node creates its updated version of events.
Blockchain technology is not a new technology but a combination of known technologies in a new way. Three technologies are combined, i.e., the internet, private key cryptography, and protocol governing incentivization. In this case, private key cryptography helps provide a powerful tool to fulfill the requirements of authentication. The keys can incentivize the users to formalize the digital relationships. It has provided the impetus for IT companies, government, and banks for seeking innovative ways to build the transaction layer of the internet.
Talking about the purpose of blockchain technology, it is to develop a secure digital identity reference. We can store data on blockchains in three ways:
· Unencrypted data– It is entirely transparent and can be read by each participant in the blockchain.
· Encrypted data– It can be read by the participants having a decryption key that provides access to the data stored on the blockchain.
· Hashed data– It shows that the data hasn’t tampered.
There is indeed particular hype around blockchain technology because of the ease of imagining high-level use cases. Upon examining the technology closely, it is noted that the technology provides specific new tools for authentication and authorization in the digital world that creates new digital relationships. By securing the new digital connections, it forms the backbone for transactions and interaction on the internet.
Blockchains are comparatively slow and include a cost to store the data. When compared, the centralized systems are faster and less expensive, are based on the client-server model.
The digital revolution has entirely transformed the media as financial institutions use computers for databases since the 1970s. Here, blockchain technology allows these institutions to create direct links between them by avoiding the central banks.